<PAGE> 1
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SCHEDULE 14A
(RULE 14a)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934
(AMENDMENT NO. )
Filed by the Registrant [ X ]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
<TABLE>
<S> <C>
[ X ] Preliminary Proxy Statement [ ] CONFIDENTIAL, FOR USE OF THE COMMISSION
ONLY (AS PERMITTED BY RULE 14a-6(e)(2))
[ ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to sec.240.14a-11(c) or sec.240.14a-12
</TABLE>
NATIONWIDE SEPARATE ACCOUNT TRUST
(NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
(NAME OF PERSON(S) FILING PROXY STATEMENT, IF OTHER THAN THE REGISTRANT)
Payment of Filing Fee (Check the appropriate box):
[ X ] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
---------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
---------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
---------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
---------------
(5) Total fee paid:
------------------------------------------------
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration
statement number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
----------------------------------------
(2) Form, Schedule or Registration Statement No.:
------------------
(3) Filing Party:
--------------------------------------------------
(4) Date Filed:
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<PAGE> 2
TOTAL RETURN FUND
CAPITAL APPRECIATION FUND
GOVERNMENT BOND FUND
MONEY MARKET FUND
NATIONWIDE SMALL COMPANY FUND
PORTFOLIOS OF NATIONWIDE SEPARATE ACCOUNT TRUST
THREE NATIONWIDE PLAZA, COLUMBUS, OHIO 43215
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
To the Owners of Variable Annuity Contracts or Variable Life Insurance Policies
issued by Nationwide Life Insurance Company or Nationwide Life and Annuity
Insurance Company (collectively, "Nationwide") entitled to give Voting
Instructions to the Shareholders of Nationwide Separate Account Trust, in
Connection with the Separate Accounts of Nationwide:
Notice is hereby given that a Special Meeting of Shareholders of the Total
Return Fund, Capital Appreciation Fund, Government Bond Fund, Money Market Fund,
and Nationwide Small Company Fund (collectively the "Portfolios"), constituting
all of the portfolios of Nationwide Separate Account Trust, a Massachusetts
business trust (the "Trust"), will be held on Friday, September 26, 1997, at
11:15 a.m., Eastern Daylight Savings Time, at Three Nationwide Plaza, Columbus,
Ohio 43215. The purpose of the Meeting is to consider and act on the following
matters:
1. To elect a Board of Trustees;
2. To ratify the selection of KPMG Peat Marwick LLP, independent public
accountants, as auditors to be employed by the Trust for the fiscal year
ending December 31, 1997;
3. To approve a new Investment Advisory Agreement between the Trust and
Nationwide Advisory Services, Inc. ("NAS") with respect to each
Portfolio (other than the Nationwide Small Company Fund) which, among
other things, will change the fees paid by Shareholders of those
Portfolios;
4. To authorize the Board of Trustees to appoint, replace or terminate
subadvisers recommended by NAS or amend the terms of any subadvisory
agreement for the Nationwide Small Company Fund without Shareholder
approval;
5. To approve the Trust's Bylaws as proposed to be amended;
<PAGE> 3
6. To approve the following matters with respect to certain fundamental
investment policies of each of Total Return Fund, Capital Appreciation
Fund, Government Bond Fund and Money Market Fund:
a. Amend such Portfolios' fundamental policy with respect to
diversification;
b. Amend such Portfolios' fundamental policy with respect to purchasing
securities on margin;
c. Amend such Portfolios' fundamental policy regarding real estate and
commodities;
d. Reclassify such Portfolios' fundamental policy prohibiting making
short sales of securities to make such policy non-fundamental;
e. Reclassify such Portfolios' fundamental policy regarding investments
in securities which are restricted as to disposition to make such policy
non-fundamental;
f. Reclassify such Portfolios' fundamental policy limiting the purchase
of securities of other investment companies to make such policy
non-fundamental;
g. Delete such Portfolios' fundamental policy regarding investment in
companies with a record of less than three years continuous operation;
h. Delete such Portfolios' fundamental policy regarding investing in
companies for the purpose of exercising control or management;
i. Delete such Portfolios' fundamental policy prohibiting the writing or
purchasing of any put or call options;
j. Delete such Portfolios' fundamental policy regarding purchasing or
retaining securities which may be held by the Trust's officers or
trustees or by such Portfolios' investment adviser; and
7. To consider and act upon any matters incidental to the foregoing and to
transact such other business as may properly come before the Meeting and
any adjournment or adjournments thereof.
Separate accounts of Nationwide are the only Shareholders of the Trust.
However, Nationwide hereby solicits and agrees to vote the shares of the
Portfolios at the Meeting in accordance with timely instructions received from
owners of variable annuity contracts and variable life insurance policies
("variable contracts") having contract values allocated to separate accounts
invested in such shares.
2
<PAGE> 4
As a variable contract owner of record at the close of business on July 30,
1997, you have the right to instruct Nationwide as to the manner in which the
Fund shares attributable to your variable contract should be voted. To assist
you in giving your instructions, a Proxy/Voting Instruction Form is enclosed
that reflects the number of shares of each Portfolio of the Trust for which you
are entitled to give voting instructions. In addition, a Proxy Statement is
attached to this Notice and describes the matters to be voted on at the Meeting
or any adjournment(s) thereof.
By Order of the Trustees,
August 19, 1997 Rae M. Pollina, Secretary
YOUR VOTE IS IMPORTANT
IN ORDER TO AVOID THE ADDITIONAL EXPENSE OF A SECOND SOLICITATION, WE URGE YOU
TO COMPLETE, SIGN AND RETURN PROMPTLY THE ENCLOSED PROXY/VOTING INSTRUCTION
FORM. FOR YOUR CONVENIENCE, THE ENCLOSED ADDRESSED ENVELOPE REQUIRES NO
POSTAGE.
3
<PAGE> 5
PROXY STATEMENT
SPECIAL MEETING OF SHAREHOLDERS OF
TOTAL RETURN FUND,
CAPITAL APPRECIATION FUND,
GOVERNMENT BOND FUND,
MONEY MARKET FUND, AND
NATIONWIDE SMALL COMPANY FUND
PORTFOLIOS OF NATIONWIDE SEPARATE ACCOUNT TRUST
TO BE HELD SEPTEMBER 26, 1997
GENERAL VOTING INFORMATION
This Proxy Statement is furnished in connection with the solicitation of
proxies by the Trustees of Nationwide Separate Account Trust, a Massachusetts
business trust (the "Trust"), to be used in connection with a Special Meeting
of Shareholders (the "Meeting") of the Trust to be held on September 26, 1997.
The Trustees have fixed the close of business on July 30, 1997, as the record
date (the "Record Date") for the determination of shareholders of the Trust
("Shareholders") entitled to notice of and to vote at the Meeting.
The mailing address of the principal executive offices of the Trust is:
Three Nationwide Plaza, Columbus, Ohio 43215. The approximate date on which
this Proxy Statement and forms of proxy are first sent to Shareholders is on or
about August 19, 1997.
The Proxy Statement is being furnished in connection with the solicitation of
voting instructions by Nationwide Life Insurance Company and Nationwide Life
and Annuity Insurance Company (collectively, "Nationwide") from owners of
certain variable annuity contracts and variable insurance policies
(collectively, "variable contracts") having contract values on the record date
allocated to a subaccount of a Nationwide separate account invested in such
shares.
Shareholders of record on the Record Date are entitled to one vote for each
share and a proportionate fractional vote for any fraction of a share as to each
issue on which such Shareholders are entitled to vote. The following sets
forth, as of the Record Date, the number of shares of beneficial interest (the
"Shares"), of each of the Trust's series or funds (singly a "Portfolio" and
collectively the "Portfolios") which were outstanding and are entitled to vote
at the Meeting:
Total Return Fund - _______________________ Shares
Capital Appreciation Fund - _______________ Shares
Government Bond Fund - ____________________ Shares
Money Market Fund - ______________________ Shares
Nationwide Small Company Fund - ___________ Shares.
At the Meeting, Shareholders will be voting either together as a group without
regard to Portfolio, or separately by Portfolio.
<PAGE> 6
Only Shareholders of record at the close of business on the Record Date will
be entitled to notice of and to vote at the Meeting. However, the separate
accounts of Nationwide are the only Shareholders of the Trust. Nationwide will
vote the shares of each Portfolio at the Meeting in accordance with the timely
instructions received from persons entitled to give voting instructions under
the variable contracts. Nationwide will vote shares attributable to variable
contracts as to which no voting instructions are received in proportion (for,
against or abstain) to those for which timely instructions are received. If a
duly executed and dated Proxy/Voting Instruction Form is received that does not
specify a choice, Nationwide will consider its timely receipt as an instruction
to vote in favor of the proposal to which it relates. Variable contract owners
may revoke previously submitted voting instructions given to Nationwide at any
time prior to the Meeting by either submitting to the Trust subsequently dated
voting instruction, delivering to the Trust a written notice of revocation or
otherwise giving notice of revocation in open Meeting, in all cases prior to
the exercise of the authority granted in the proxy/voting instructions.
THE TRUST WILL FURNISH, WITHOUT CHARGE, A COPY OF THE TRUST'S MOST RECENT
ANNUAL REPORT TO SHAREHOLDERS AND THE SEMI-ANNUAL REPORT TO SHAREHOLDERS
SUCCEEDING THE ANNUAL REPORT ONCE IT IS AVAILABLE, UPON REQUEST, WHICH REQUEST
MAY BE MADE EITHER BY WRITING TO THE TRUST AT THE ADDRESS ABOVE OR BY CALLING
TOLL-FREE (800) 848-0920. THE ANNUAL REPORT AND THE SEMI-ANNUAL REPORT AS
AVAILABLE WILL BE MAILED TO YOU BY FIRST-CLASS MAIL WITHIN THREE BUSINESS DAYS
OF RECEIPT OF YOUR REQUEST.
The following table summarizes the proposals on which Shareholders are being
asked to vote (singly a "Proposal" and collectively the "Proposals") and
indicates which Shareholders are eligible to vote on each Proposal. Proposals
1, 2, and 5 relate to all Portfolios; Proposal 3 and each of the sections of
Proposal 6 only relate to the Total Return Fund, the Capital Appreciation Fund,
the Government Bond Fund and the Money Market Fund (the "Funds"); and Proposal 4
only relates to the Nationwide Small Company Fund. Shareholders of all
Portfolios will vote together as a group, without regard to Portfolio, on
Proposals 1, 2 and 5. The Shareholders of the Funds, and not those of the
Nationwide Small Company Fund, will vote on Proposal 3 and 6.a. through 6.j. on
a Fund by Fund basis, rather than together as a group. Only Shareholders of the
Nationwide Small Company Fund will vote on Proposal 4.
5
<PAGE> 7
<TABLE>
<S> <C> <C>
Proposal Brief Description of the Proposal Shareholders who will vote on
the Proposal
Proposal 1 To elect a Board of Trustees. Shareholders of All
Portfolios Voting Together As
a Group
Proposal 2 To ratify the selection of KPMG Peat Marwick LLP Shareholders of All
as independent accountants. Portfolios Voting Together As
a Group
Proposal 3 To approve a new Investment Advisory Agreement Shareholders of All Funds
between the Trust and Nationwide Advisory Voting Separately
Services, Inc. with respect to each Portfolio By Fund
(other than Nationwide Small Company Fund) which,
among others, will change the fees paid by
Shareholders of these Portfolios.
Proposal 4 To authorize the Board of Trustees to appoint, Shareholders of Nationwide
replace or terminate subadvisers recommended by Small Company Fund only
Nationwide Advisory Services, Inc. or amend the
term of any subadvisory agreement for Nationwide
Small Company Fund without Shareholder approval.
Proposal 5 To approve the Trust's Bylaws as proposed to be Shareholders of All
amended and restated. Portfolios Voting Together As
a Group
To approve the following matters with respect to
certain fundamental investment policies of each of
the Total Return Fund, the Capital Appreciation
Fund, the Government Bond Fund and the Money
Market Fund:
Proposal 6.a. Amend such Portfolios' fundamental policy with Shareholders of Such
respect to diversification. Funds Voting Separately
By Fund
</TABLE>
6
<PAGE> 8
<TABLE>
<S> <C> <C>
Proposal 6.b. Amend such Portfolios' fundamental policy with Shareholders of Such
respect to purchasing securities on margin. Funds Voting Separately
By Fund
Proposal 6.c. Amend such Portfolios' fundamental policy Shareholders of Such
regarding real estate and commodities. Funds Voting Separately
By Fund
Proposal 6.d. Reclassify such Portfolios' fundamental policy Shareholders of Such
prohibiting making short sales of securities, to Funds Voting Separately
make such policy non-fundamental. By Fund
Proposal 6.e. Reclassify such Portfolios' fundamental policy Shareholders of Such
regarding the investment in securities which are Funds Voting Separately
restricted as to disposition to make such policy By Fund
non-fundamental.
Proposal 6.f. Reclassify such Portfolios' fundamental policy Shareholders of Such
limiting the purchase of securities of other Funds Voting Separately
investment companies to make such policy non- By Fund
fundamental.
Proposal 6.g. Delete such Portfolios' fundamental policy Shareholders of Such
regarding investing in companies with a record of Funds Voting Separately
less than three years continuous operations. By Fund
Proposal 6.h. Delete such Portfolios' fundamental policy Shareholders of Such
regarding investing in companies for the purpose Funds Voting Separately
of exercising control or management. By Fund
Proposal 6.i. Delete such Portfolios' fundamental policy Shareholders of Such
prohibiting the writing or purchasing of any put Funds Voting Separately
or call options. By Fund
Proposal 6.j. Delete such Portfolios' fundamental policy Shareholders of Such
regarding purchasing or retaining securities which Funds Voting Separately
may be held by the Trust's officers or trustees or By Fund
by such Portfolios' investment adviser.
</TABLE>
7
<PAGE> 9
The Trust knows of no business other than that mentioned in Proposals 1
through 6 of the Notice which will be presented for consideration at the
Meeting. If any other matters are properly presented, it is the intention of
the persons named on the enclosed Proxy/Voting Instruction Form to vote proxies
in accordance with their best judgment. In the event a quorum is present at
the Meeting but sufficient votes to approve any of the Proposals with respect
to one or more Portfolios are not received, the persons named as proxies may
propose one or more adjournments of the Meeting to permit further solicitation
of proxies, provided they determine that such an adjournment and additional
solicitation is reasonable and in the interests of Shareholders.
PROPOSAL 1 - ELECTION OF TRUSTEES
It is the present intention that the proxies will be used for the purposes of
voting in favor of the election of each of the following nominees as a Trustee
to hold office until the next meeting of Shareholders and until his or her
successor is elected and qualified. Each of the nominees, except for Messrs.
Gasper, Kridler and Woodward and Ms. Doody, presently is a Trustee of the
Trust. Pursuant to Rule 14a-4(d) under the Securities Exchange Act of 1934, as
amended, each nominee has consented to be named in this Proxy Statement and to
serve if elected. It is not expected that any of the nominees will decline or
become unavailable for election, but in case this should happen, the
discretionary power given in the proxy may be used to vote for a substitute
nominee or nominees.
8
<PAGE> 10
<TABLE>
<CAPTION>
Name, Age
and Position Principal Occupation(s) A Trustee of
With the Trust During Past Five Years the Trust Since
-------------- ---------------------- ---------------
<S> <C> <C>
Dr. John C. Bryant Dr. Bryant is Executive Director of the 1990
Age 61 Cincinnati Youth Collaborative.
Trustee
Sue A. Doody Ms. Doody is Owner of Lindey's Restaurant, Not Currently a Trustee
Age 62 Columbus, Ohio.
Robert M. Duncan Mr. Duncan is a member of the Ohio Elections 1987
Age 69 Commission. He was formerly Secretary to the
Trustee Board of Trustees of The Ohio State
University. Prior to that, he was Vice
President and General Counsel of The Ohio
State University.
*Joseph J. Gasper Mr. Gasper is President and Chief Not Currently a Trustee
Age 54 Operating Officer of Nationwide Life
Insurance Company. Prior to that he was
Executive Vice President and Senior
Vice President for Nationwide Insurance
Enterprise.
Dr. Thomas J. Kerr, IV Dr. Kerr is President Emeritus of Kendall 1982
Age 63 College. He was formerly President of
Trustee Kendall College.
Douglas F. Kridler Mr. Kridler is President and Executive Not Currently a Trustee
Age 42 Director of the Columbus Association for
the Performing Arts.
</TABLE>
9
<PAGE> 11
<TABLE>
<S> <C> <C>
*Robert J. Woodward, Jr. Mr. Woodward is Executive Vice Not Currently a Trustee
Age 55 President - Chief Investment
Officer of the Nationwide
Insurance Enterprise and of
Nationwide Advisory Services,
Inc.
</TABLE>
* Messrs. Gasper and Woodward are each considered an "interested person" of the
Trust, as that term is defined in Section 2(a)(19) of the Investment Company
Act of 1940, as amended (the "1940 Act").
Except for Messrs. Gasper and Woodward, each nominee for Trustee is also a
trustee of Nationwide Investing Foundation ("NIF"). Except for Messrs. Gasper,
Kridler and Woodward and Ms. Doody, the nominees are also trustees of
Nationwide Investing Foundation II ("NIF II") and Financial Horizons Investment
Trust ("FHIT"). Except for Messrs. Bryant and Kerr, each of the trustees is
also a trustee of Nationwide Asset Allocation Trust ("NAAT"). NIF, NIF II,
FHIT and NAAT are registered investment companies. Mr. Gasper is a director of
Nationwide Financial Services, Inc. Mr. Duncan is a director of First Federal
Savings & Loan of Newark, Ohio and American Electric Power Co., Inc.
During the fiscal year ended December 31, 1996, no Trustee or officer
affiliated with Nationwide Advisory Services, Inc. as the Portfolios'
investment adviser ("NAS") or any subadviser for any of the Portfolios
received any direct remuneration from the Trust for serving in such capacities.
During the fiscal year ended December 31, 1996, the Trust's Board of Trustees
held four meetings. Each of Messrs. Bryant, Duncan and Kerr attended at least
75% of the meetings. Messrs. Gasper, Kridler and Woodward and Ms. Doody were
not trustees of the Trust during that period. In addition, the trustees of the
Trust authorized by unanimous written consent the creation of and filing of a
registration statement for the Nationwide Income Fund, a new portfolio which
has not yet begun operations.
A plurality of the votes cast at a meeting of Shareholders at which a quorum
is present is required for the election of Trustees.
The following table sets forth information regarding all compensation paid by
the Trust to its trustees for their services as trustees during the fiscal year
ended December 31, 1996. The Trust has no pension or retirement plans.
10
<PAGE> 12
COMPENSATION TABLE
<TABLE>
<CAPTION>
Aggregate Total Compensation
Name and Position compensation From the Trust
With the Trust From the Trust and the Fund Complex*
- -------------- -------------- ---------------------
<S> <C> <C>
Dr. John C. Bryant $1,000 $15,500
Trustee
Robert M. Duncan $1,000 $15,500
Trustee
Dr. Thomas J. Kerr, IV $1,000 $15,500
Trustee
Dimon R. McFerson1 $ 0 $ 0
Trustee
</TABLE>
*For purposes of this Table, Fund Complex means one or more mutual funds
which have a common investment adviser or affiliated investment advisers or
which hold themselves out to the public as being related and means here NIF,
NIF II, NAAT and FHIT, as well as the Trust.
1 Mr. McFerson will resign as a Trustee of the Trust effective immediately
prior to the Meeting.
EXECUTIVE OFFICERS
The following table sets forth certain information with respect to the
executive officers of the Trust:
<TABLE>
<CAPTION>
Name, Age and An Officer
Position with Principal Occupation of the
the Trust During the Past Five Years Trust Since
--------- -------------------------- -----------
<S> <C> <C>
Dimon Richard McFerson Since April, 1996, Mr. McFerson has been May 4, 1994
Age 60 Chairman and Chief Operating Officer for the
Chairman Nationwide Insurance Enterprise. From
December, 1992 to April 1996 he was President
and Chief Executive Officer of Nationwide
Mutual Insurance Company and Nationwide Mutual
Fire Insurance Company.
James F. Laird, Jr. Since April, 1995, Mr Larid has been Vice November 19, 1987
Age 40 President-General Manager of Nationwide
Treasurer Advisory Services, Inc. Prior to that he was
Treasurer of Nationwide Advisory Services,
Inc.
</TABLE>
11
<PAGE> 13
The executive officers of the Trust are elected annually by the Board of
Trustees and hold office until their respective successors are duly elected.
None of the officers of the Trust receives compensation from the Trust for
serving as an officer.
PROPOSAL 2 -- RATIFICATION OF SELECTION OF
INDEPENDENT PUBLIC ACCOUNTANTS
The Board of Trustees of the Trust, including a majority of the Board of
Trustees who are not "interested persons" of the Trust, on March 4, 1997,
approved the selection of KPMG Peat Marwick LLP as the independent public
accountants of the Trust for the fiscal year ending December 31, 1997. Unless
instructed in the Proxy/Voting Instruction Form to the contrary, the persons
named therein intend to vote in favor of the ratification of the selection of
KPMG Peat Marwick LLP as independent public accountants of the Trust to serve
for the fiscal year ending December 31, 1997.
Shareholders of all Portfolios of the Trust will vote jointly on the
proposal to ratify the selection of KPMG Peat Marwick LLP as independent public
accountants of the Trust to serve for the fiscal year ending December 31, 1997.
Ratification requires the affirmative vote of a majority of the Shares of the
Trust who are present at the Meeting in person or by proxy.
A representative of KPMG Peat Marwick LLP will be available by telephone
during the Meeting with an opportunity to make a statement if the representative
desires to do so and to respond to appropriate questions.
THE TRUSTEES RECOMMEND THAT YOU VOTE "FOR" PROPOSAL 2.
PROPOSAL 3 - APPROVAL OF A NEW
INVESTMENT ADVISORY AGREEMENT
The Shareholders of the Total Return Fund, Capital Appreciation Fund,
Government Bond Fund and Money Market Fund (each, a "Fund") are being asked to
approve a new Investment Advisory Agreement (the "Proposed Agreement") with NAS.
At a special meeting of the Trust's Board of Trustees held on July 18, 1997, the
Board of Trustees approved a number of changes relating to the compensation for
and the manner in which certain investment advisory and administrative services
are provided to each of the Funds. In summary, the Trustees determined to revise
the investment advisory and administration fees for the Funds and to separate
12
<PAGE> 14
the investment advisory services provided by NAS from the basic administrative
services that NAS provides. If the Shareholders of a Fund approve the Proposed
Agreement, these changes will be implemented by that Fund.
NAS currently serves as the investment adviser to the Funds pursuant to an
Investment Advisory Agreement dated as of October 22, 1981 (the "Current
Agreement"). Pursuant to the terms of the Current Agreement, NAS is responsible
for managing, or providing for the management of, the investment and
reinvestment of the Trust's assets in conformity with the Funds' investment
objectives, fundamental policies and restrictions as set forth in the Trust's
most recent Prospectus and Statement of Additional Information for the Funds.
Under the Current Agreement, NAS also provides administrative services, office
space, equipment and clerical personnel necessary for servicing the investments
of the Trust and maintaining its organization. The Current Agreement was
initially approved by the Trust's Board of Trustees on October 22, 1981, was
most recently approved by the Board on August 28, 1996, and as presently
constituted was approved by the Shareholders of the Trust on May 20, 1993. The
Current Agreement has not since been submitted to Shareholders for their
approval.
In addition to serving as investment adviser, NAS is paid $48,000 per year
from the Trust to provide fund accounting and daily valuation services for the
Funds. Nationwide Investors Services, Inc., a wholly owned subsidiary of NAS,
provides transfer and dividend disbursing agent services to each Portfolio for
an annual account-based fee of $16 per account for equity funds and $18 per
account for bond and money market funds. Because of the small number of omnibus
accounts in each Fund, total transfer agent and dividend disbursing agent fees
for the Funds were just $1247 for the year ended December 31, 1996.
COMPARISON OF THE CURRENT AND PROPOSED INVESTMENT ADVISORY AGREEMENTS
Pursuant to the Proposed Agreement, NAS will continue to provide the same
types of investment advisory services that it currently provides to the Funds
under the Current Agreement. However, the fund administration services that NAS
currently provides to the Funds and is compensated for under the Current
Agreement would be provided by NAS under a separate fund administration
agreement (the "Fund Administration Agreement"). The Fund Administration
Agreement would also cover the fund accounting services, including daily
valuation and pricing, provided by NAS for the Funds. Under the terms of the
Fund Administration Agreement, NAS would receive for its services to each Fund a
fee, calculated daily and paid monthly, at an annual rate of 0.05% of a Fund's
average daily net assets on the first $1 billion of assets and 0.04% on assets
of $1 billion and more.
The 1940 Act does not require that Shareholders of a Fund vote upon or
otherwise approve the Fund Administration Agreement or any subsequent amendments
or modifications thereto, including changes in the fees charged to a Fund. If
the Proposed Agreement is approved by Shareholders of a Fund, NAS will enter
into the Proposed Agreement and the Fund Administration Agreement with the Trust
on behalf of that Fund. The
13
<PAGE> 15
Board of Trustees has unanimously approved the Fund Administration Agreement for
each Fund, subject to approval of the Proposed Agreement by Shareholders of that
Fund.
The fees to be paid to NAS by each Fund under the Proposed Agreement would
also change from those currently charged under the Current Agreement. Each Fund
is currently charged a 0.50% annual fee on such Fund's average annual daily net
assets. The proposed investment advisory fees, expressed as an annual
percentage of average daily net assets, are set forth below and are in addition
to the fees to be charged under the Fund Administration Agreement:
14
<PAGE> 16
<TABLE>
<CAPTION>
Fund Proposed Advisory Fees
- ---- ----------------------
<S> <C>
Total Return Fund 0.60% on the first $1 billion in assets
and Capital Appreciation 0.575% on assets of more than $1 billion but less
Fund than $2 billion
0.55% on assets of more than $2 billion but less
than $5 billion
0.50% for assets of more than $5 billion
Government Bond Fund 0.50% on the first $1 billion in assets
0.475% on assets of more than $1 billion but less
than $2 billion
0.45% on assets of more than $2 billion but less
than $5 billion
0.40% for assets of more than $5 billion
Money Market Fund 0.40% on the first $1 billion in assets
0.38% on assets of more than $1 billion but less
than $2 billion
0.36% on assets of more than $2 billion but less
than $5 billion
0.34% for assets of more than $5 billion
</TABLE>
Like the Current Agreement, the Proposed Agreement states that the Trust
will pay all of its other expenses. These expenses include, but are not limited
to, charges and expenses of any custodian or transfer and dividend disbursing
agent, the charges and expenses of independent certified public accountants, the
charges and expenses of dividend and capital gain distributions, the
compensation and expenses of Trustees of the Trust who are not "interested
persons" of NAS, brokerage fees and commissions, taxes, all expenses of
Shareholders' and Trustees' meetings and of preparing, printing and distributing
prospectuses and reports to Shareholders, charges and expenses of legal counsel
for the Trust, insurance and bonding premiums, charges and expenses for fund
accounting and daily valuation services, and expenses relating to the issuance,
registration and qualification of the Trust's shares.
The following chart shows the aggregate amount of the investment advisory
fee paid by each Fund during the year ended December 31, 1996; the amount NAS
would have received during the same period had the proposed fees been in effect
and the percentage difference between the two:
15
<PAGE> 17
<TABLE>
<CAPTION>
1996 Actual 1996 Pro Forma Percentage
Fund Advisory Fees Advisory Fees Difference
---- ------------- ------------- ----------
<S> <C> <C> <C>
Capital Appreciation Fund $ 684,932 $ 821,919 20%
Total Return Fund $4,851,676 $5,822,011 20%
Government Bond Fund $2,225,962 $2,225,962 --
Money Market Fund $4,518,925 $3,615,140 (20%)
</TABLE>
NAS also acts as investment advisor for several other regulated investment
companies. The chart below shows information for other services of open-end
investment Companies for which NAS performs advisory services with investment
objectives similar to those of the Capital Appreciation, Total Return,
Government Bond and Money Market Funds:
<TABLE>
<CAPTION>
Net Assets NAS'
as of Compensation as a
Fund December 31, 1996 % of Average Net Assets
---- ----------------- -----------------------
<S> <C> <C>
Nationwide Fund (similar to Total Return Fund) $996 million .50%
Nationwide Growth Fund (similar to Capital Appreciation Fund) $687 million .50%
Financial Horizons Growth Fund (similar to Capital Appreciation Fund) $ 9 million .65%
Nationwide U.S. Government Income Fund (similar to Government Bond Fund) $ 39 million .65% up to $250 million
.60% next $250 million
.55% next $250 million
.50% over $750 million
Nationwide Money Market Fund (similar to Money Market Fund) $746 million .50%
Financial Horizons Cash Reserve Fund (similar to Money Market Fund) $ 4 million .65%
</TABLE>
In order to provide each Fund with greater flexibility in its future
operations, the Proposed Agreement provides that NAS may appoint one or more
subadvisers to manage all or a portion of a Fund subject to Trustee and
Shareholder approval as required by Section 15 of the 1940 Act. Therefore,
before any subadviser is appointed for a Fund, Shareholders of that Fund will
have to vote upon and approve such appointment.
The Proposed Agreement, unlike the Current Agreement, also includes
provisions which would allow NAS, to the extent permitted by applicable law, to
consider brokerage and research services provided by various brokers in
determining who will execute Fund portfolio transactions. The payment for such
brokerage and research services with such Fund is commonly referred to as "soft
dollar" arrangements.
While NAS' liability under both the Current and the Proposed Agreements is
limited to situations involving its wilful misfeasance, bad faith, gross
negligence or reckless disregard of its obligations and duties under such
agreements, the Proposed Agreement also provides that NAS will indemnify the
Trust and its officers and trustees for any liability which results
16
<PAGE> 18
from NAS' wilful misfeasance, bad faith, gross negligence, reckless disregard
of its duties under the Proposed Agreement or violation of applicable law.
Unless sooner terminated, the Current Agreement by its terms remains in
effect for successive one-year periods ending October 22nd of each year. The
initial term of the Proposed Agreement will not be longer than two years, and
the Fund Administration Agreement will continue until it is terminated by either
or both parties upon at least 90 days' advance written notice to the other
party. Both the Current and Proposed Agreements provide that each agreement will
continue past its initial term from year to year only so long as (1) such
continuance is specifically approved at least annually by the Trust's Board of
Trustees or by a vote of a majority of the outstanding voting securities of that
Fund, and (2) such renewal has been approved by the vote of a majority of
Trustees of the Trust who are not "interested persons" as that term is defined
by the 1940 Act, of any party to such Agreement, cast in person at a meeting
called for the purpose of voting on such approval.
Both the Current and the Proposed Agreement are not assignable. The Current
Agreement may be terminated with respect to a Fund without penalty on not more
than 60 days or less than 30 days' written notice at the option of either party
or by a vote of the Shareholders of that Fund. The Proposed Agreement as to a
Fund may be terminated by either party or by the vote of Shareholders of that
Fund on not less than 60 days' advance written notice.
REASONS FOR THE PROPOSED CHANGES
As discussed above, the primary changes proposed in the New Investment
Advisory Agreement are revisions to the compensation paid by each Fund to NAS
and the removal of administrative services from the Proposed Agreement. In the
years since the adoption of the Current Agreement, the mutual fund industry has
changed considerably, and in light of these changes, NAS has reviewed the
compensation that it receives from each of the Funds. In particular, it
evaluated the amount of compensation that it receives under the Current
Agreement from each Fund and the need to more precisely identify the investment
advisory and administrative services and fees. In connection with its analysis,
NAS particularly identified the investment in professional staff, computer
systems and support that it has made, and will need to make, to ensure continued
high-quality investment management and fund administration.
The Board of Trustees, in approving the Proposed Agreement, considered
written material and information presented orally at their July 18, 1997 board
meeting. Specifically, the Trustees considered the following factors, among
others: (1) the nature, scope and quality of the services provided by NAS, (2)
the costs incurred and revenues generated by NAS in rendering such services, (3)
NAS' profitability from its mutual fund activities, (4) the compensation paid to
investment advisers of mutual funds with similar investment objectives and
policies and asset sizes, (5) the quality of personnel at NAS, (6) comparative
expense and performance information, (7) pro forma expense ratios based upon
the proposed level of investment advisory fees, (8) the need to provide NAS
with adequate financial incentives to maintain and improve its services, and
(9) NAS'
17
<PAGE> 19
planned and proposed additional expenditures in the area of fund administration
and investment advisory services.
More specifically, the Board considered the significant increases in
expenses that NAS will experience in connection with the management of the
Capital Appreciation and Total Return Funds and in the general administration
and fund accounting for each of the Funds and the fact that the total expense
ratios for each of the Funds would continue to be at least 15% lower than the
average for comparable Funds. The Board also determined that the proposed
breakpoints in the Funds' fees would allow Shareholders of those Funds to
benefit from certain economies of scale as a Fund's assets grow.
In reaching its conclusion to approve the Proposed Agreement specifically as
it relates to the Total Return and Capital Appreciation Funds, the Board
determined that the increased fees were necessary for NAS to maintain
high-quality services to those Funds, especially in today's competitive
environment where there are strong pressures to attract and retain qualified
professionals and to dedicate greater resources to the management of funds that
invest in equity securities. In determining to breakout the administrative
services provided to each of the Funds and to charge a separate fee for such
services, the Board specifically considered the increased costs of improved
technology and the need to maintain high quality compliance and administrative
services.
With respect to the Government Bond and Money Market Funds, while the
administrative and fund accounting services for those Funds will be performed
under the Fund Administration Agreement, for which NAS will receive a separate
fee, the fees paid under the Proposed Agreement, (i) for the Government Bond
Fund, at the initial level are the same as those paid under the Current
Agreement, and (ii) for the Money Market Fund, are lower that those paid under
the Current Agreement. In addition, each Fund will receive the benefit of
breakpoints in its investment advisory fees at certain asset levels which will
cause that Fund's overall investment advisory expenses, as a percentage of such
Fund's assets, to decline as such Fund's assets grow. And with respect to each
Fund, the Board determined that based on the Funds' performance and the level
of the proposed fees and total expense ratios relative to comparable funds, the
proposed changes were reasonable and in the best interests of each Fund and its
Shareholders.
The tables below compare the current operating expenses based on average
net assets for the year ended December 31, 1996, including investment advisory
fees, paid by the Funds to those fees the Funds would have paid on a pro forma
basis, if the Proposed Agreement and the Fund Administration Agreement had been
in place:
18
<PAGE> 20
Annual Fund Operating Expenses
(as a percentage of average net assets)
<TABLE>
<CAPTION>
Capital Total Government Money
Appreciation Return Bond Market
------------ ------ ---- ------
Current ProForma Current ProForma Current ProForma Current ProForma
------- -------- ------- -------- ------- -------- ------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Advisory Fees .50% .60% .50% .60% .50% .50% .50% .40%
Administration Fees -- .05% -- .05% -- .05% -- .05%
All Other Expenses .02% .03% .01% .02% .01% .02% .01% .02%
---- ---- ---- ---- ---- ---- ---- ----
Total Fund
Operating Expenses .52% .68% .51% .67% .51% .57% .51% .47%
==== ==== ==== ==== ==== ==== ==== ====
</TABLE>
Example:
You would pay the following expenses on a $1,000 investment, assuming (1) 5%
annual return and (2) redemption at the end of each time period:
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1 year $ 5 $ 7 $ 5 $ 7 $ 5 $ 6 $ 5 $ 5
3 years $17 $22 $16 $21 $16 $18 $16 $15
5 years $29 $38 $29 $37 $29 $32 $29 $26
10 years $65 $85 $64 $83 $64 $71 $64 $59
</TABLE>
The expenses shown in the above chart and example do not include variable
contract charges. The example should not be considered a representation of past
or future expenses. Actual expenses may be greater or less than those shown.
A copy of the Proposed Agreement is attached hereto as Exhibit A. The
Proposed Agreement with respect to each Fund was approved unanimously by the
Trust's Board of Trustees, including a majority of the Trustees who are not
parties to such Agreement or interested persons of any such party, at the
special meeting held on July 18, 1997, and is being submitted to the
Shareholders of each of the Funds for approval at the Meeting.
Approval of the Proposed Agreement with respect to each Fund requires the
affirmative vote of a majority of all outstanding Shares of that Fund, defined
as the lesser of (a) 67% or more of the outstanding shares of the Fund present
at such meeting, if holders of more than 50% of the Shares are present or
represented by proxy, or (b) more than 50% of the Shares of that Fund. If the
Proposed
19
<PAGE> 21
Agreement is not approved, NAS will continue to manage the Fund under the
Current Agreement while it explores other options.
THE TRUSTEES RECOMMEND THAT YOU VOTE "FOR" PROPOSAL 3.
ADDITIONAL INFORMATION REGARDING NAS
NAS, an Ohio corporation, is a registered investment adviser and
broker-dealer which provides investment advisory and administrative services to
the Trust and four other investment company trusts. The address of NAS is Three
Nationwide Plaza, Columbus, Ohio 43215. NAS is a wholly owned subsidiary of
Nationwide Life Insurance Company ("NLIC"). NLIC is a wholly owned subsidiary of
Nationwide Financial Services, Inc., a holding company ("NFS"). NFS has two
classes of common stock outstanding with different voting rights enabling
Nationwide Corporation (the holder of all of the outstanding Class B Common
Stock) to control NFS. All of the common stock of Nationwide Corporation is
held by Nationwide Mutual Insurance Company (95.3%) and Nationwide Mutual Fire
Insurance Company (4.7%), each of which is a mutual company owned by its
policyholders.
Because the Portfolios are sold as underlying mutual fund options in
variable products, there is no principal underwriter for the Portfolios, but NAS
provides marketing and wholesaling at no additional cost for the Portfolios.
The name, address and principal occupation of the principal executive
officers and each director of NAS are as follows:
<TABLE>
<CAPTION>
Principal Occupation
Name Position with NAS and Business Address(1)
- ----------------- ----------------- -----------------------
<S> <C> <C>
Dimon Richard Chairman of the Board, Chairman Chairman and Chief Executive
McFerson(1) and Chief Executive Officer- Officer-Nationwide Insurance
Nationwide Insurance Enterprise, Director Enterprise
Joseph J. Gasper(1) President, Director President and Chief Operating
Officer Nationwide Life
Insurance Company and
Nationwide Life and Annuity
Insurance Company
</TABLE>
20
<PAGE> 22
<TABLE>
<S> <C> <C>
Robert A. Oakley(1) Executive Vice President- Executive Vice President-
Chief Financial Officer, Chief Financial Officer
Director Nationwide Insurance
Enterprise
Gordon E. McCutchan(1) Executive Vice President- Executive Vice President-
Law and Corporate Services, Law and Corporate Services
Director Nationwide Insurance
Enterprise
Robert J. Woodward, Jr.(1) Executive Vice President- Executive Vice President-
Chief Financial Officer, Chief Investment Officer
Director Nationwide Insurance
Enterprise
James F. Larid, Jr. Vice President-General Manager Vice President-General Manager
Three Nationwide Plaza, Nationwide Advisory Services. Inc.
Columbus, Ohio 43215
</TABLE>
(1) Unless otherwise noted, the business address for each Trustee is One
Nationwide Plaza, Columbus, Ohio 43215.
PROPOSAL 4 - AUTHORIZATION FOR THE BOARD OF TRUSTEES TO APPOINT, REPLACE OR
TERMINATE SUBADVISERS RECOMMENDED BY NATIONWIDE ADVISORY
SERVICES, INC. OR AMEND THE TERMS OF ANY SUBADVISER AGREEMENT FOR THE
NATIONWIDE SMALL COMPANY FUND WITHOUT SHAREHOLDER APPROVAL
Section 15(a) of the 1940 Act requires that all contracts pursuant to which
persons serve as investment advisers to investment companies be approved by
Shareholders. As interpreted, this requirement would apply to the appointment
of subadvisers to the Nationwide Small Company Fund for which NAS acts as
investment adviser. The United States Securities and Exchange Commission (the
"SEC"), however, has granted conditional exemptions from the Shareholder
approval requirements for situations where a fund utilizes a multi-manager
approach to portfolio investing. NAS and the Trust have applied for such an
exemption, and if it is granted and this proposal is approved by the
21
<PAGE> 23
Shareholders of the Nationwide Small Company Fund, the Board of Trustees would,
without further shareholder approval, be able to appoint additional or
replacement subadvisers, terminate subadvisers, rehire existing subadvisers
whose agreements have been assigned (and thus automatically terminated) and
enter into or modify subadvisory agreements.
This Proposal 4 is intended to facilitate the efficient operation of the
multi-manager structure and afford the Trust increased management flexibility.
Under the multi-manager structure, NAS, with the approval of the Board of
Trustees, would have similar authority and flexibility with respect to
subadvisers that it has for its own internal portfolio managers, namely, that
NAS can continually monitor their performance and replace them if NAS, with the
approval of the Board of Trustees, believes such action is appropriate, for
example, if the performance is not satisfactory. NAS will continuously monitor
the performance of each subadviser and may from time to time recommend that the
Board of Trustees add, replace or terminate one or more subadvisers or appoint
additional subadvisers, depending on NAS' assessment of what combination of
subadvisers it believes will optimize the Nationwide Small Company Fund's
chances of achieving its investment objective.
While there is no way of knowing exactly how often NAS may recommend, and
the Board may approve, the selection of an additional subadviser, or the
replacement or termination of an existing subadviser, each of which would
typically require a shareholder meeting, it is likely that the multi-manager
structure would result in more frequent shareholder meetings than would
otherwise be the case. However, if the SEC grants the exemption, the Trustees
will not be required to call a shareholder meeting each time a new subadviser is
approved (or to reapprove a subadviser whose subadvisory agreement is
automatically terminated because it has been purchased by another entity).
Shareholder meetings entail substantial costs, and may entail substantial
delays, which could reduce the desired benefits of the multi-manager structure.
These costs and delays must be weighed against the benefits of shareholder
scrutiny of proposed contracts with additional or replacement subadvisers;
however, even in the absence of Shareholder approval, any proposal to add or
replace subadvisers would receive careful review. First, NAS would assess the
Nationwide Small Company Fund's needs and, if it believed additional or
replacement subadvisers could benefit the Nationwide Small Company Fund, it
would systematically search the relevant universe of available investment
managers. Second, any recommendations made by NAS would have to be approved by
a majority of the Trustees, including a majority of the Trustees who are not
"interested persons" of NAS within the meaning of the 1940 Act. Third, any
selections of additional subadvisers or replacement subadvisers would have to
comply with conditions contained in the SEC exemptive order, if granted.
Finally the Board of Trustees would not be able to replace NAS as investment
adviser for the Nationwide Small Company Fund without obtaining Shareholder
approval of the new investment adviser.
Subject to SEC exemptive relief, approval of this proposal requires the
affirmative vote of a majority of the outstanding voting securities of
Nationwide Small Company Fund. If this proposal is not approved, the Board
must seek Shareholder approval to institute any of the actions described in the
proposal.
THE TRUSTEES RECOMMEND THAT YOU VOTE "FOR" PROPOSAL 4.
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<PAGE> 24
PROPOSAL 5 - AMENDMENT TO BYLAWS
PROPOSED CHANGES
The Trustees propose two changes to the Trust's Amended Bylaws. The first
change would delete the existing detailed language under Article X entitled
"Custodian" and replace it with simpler language that states that the Trustees
shall employ a bank or trust company as custodian in accordance with the 1940
Act and the rules thereunder. The second proposed change would amend Article XI
entitled Amendments to delete language which requires Shareholder approval to
amend Sections 1 and 4 of Article X and the provisions of Article XI.
The proposed language for Article X regarding the custodian will give the
Trust more flexibility with respect to custody arrangements as the global
securities markets continue to expand. However, the Trust will still be subject
to the safeguards and requirements set forth in the 1940 Act. The proposed
change in Article XI deleting the requirement for Shareholder vote of certain
sections of Article X and Article XI will make Article XI consistent with the
proposed language in Article X. In addition, it will give the Trust flexibility
to change its custodial relationship in accordance with its needs, as permitted
by the 1940 Act.
A copy of Articles X and XI of the Amended Bylaws, marked to show the
language which is proposed to be deleted and inserted in its place, is attached
hereto as Exhibit B. Approval of the amendments to the Trust's Bylaws requires
a majority of the votes of all Portfolios of the Trust voting together as a
group. If the proposal is not approved, Articles X and XI will remain
unchanged.
THE TRUSTEES RECOMMEND THAT YOU VOTE "FOR" PROPOSAL 5.
ADOPTION OF STANDARDIZED INVESTMENT POLICIES RELATING TO DIVERSIFICATION,
PURCHASING SECURITIES ON MARGIN, PURCHASING REAL ESTATE AND COMMODITIES, SHORT
SALES OF SECURITIES, PURCHASING SECURITIES RESTRICTED AS TO DISPOSITION,
PURCHASING SECURITIES OF OTHER INVESTMENT COMPANIES, PURCHASING SECURITIES OF
COMPANIES WITH LESS THAN THREE YEARS OPERATIONS, INVESTING IN COMPANIES FOR
CONTROL OR MANAGEMENT, PURCHASING OPTIONS, AND PURCHASING SECURITIES HELD BY
OFFICERS OR TRUSTEES
The primary purpose of the proposals set forth in Items 6.a . through 6.j.,
as described more fully below, is to revise several of the fundamental
investment policies for the Total Return Fund, Capital Appreciation Fund,
Government Bond Fund and Money Market Fund (the "Funds") to conform to
limitations which are expected to become standard for all Funds of the Trust and
for each of the Nationwide funds advised by NAS, including those of NIF, NIF-II
and FHIT (collectively, the "Nationwide Funds"). NAS believes that increased
standardization with respect to such fundamental policies among all Nationwide
Funds will help promote operational efficiencies and facilitate monitoring
compliance with fundamental and non-fundamental policies relating to the
investment techniques described below. Although modification or elimination
of these fundamental policies is not
23
<PAGE> 25
likely to have any material impact on the investment techniques employed by any
of the Funds at this time, it will contribute to the overall objective of
standardization.
THE TRUSTEES RECOMMEND THAT YOU VOTE "FOR" EACH OF PROPOSALS 6.A. THROUGH
6.J.
PROPOSALS 6.A.,6.B AND 6.C. IF APPROVED, WILL AMEND THE FUNDS' FUNDAMENTAL
POLICY REGARDING DIVERSIFICATION, PURCHASING SECURITIES ON MARGIN AND PURCHASING
REAL ESTATE AND COMMODITIES, RESPECTIVELY.
PROPOSAL 6.A. - AMENDMENT OF FUNDAMENTAL POLICY REGARDING DIVERSIFICATION
Each Fund's fundamental policy on portfolio diversification currently
provides that:
[No Fund may]: Purchase voting securities of any issuer or purchase the
securities of any issuer if, as a result thereof (a) more than 5% of a
Fund's total assets (taken at current value) would be invested in the
securities of such issuer (except that the Money Market Fund may invest up
to 10% of its total assets in the highest rated securities of a single
issuer for a period of up to three business days thereafter, provided that
the Money Market Fund does not make more than one such investment at any one
time), (b) a Fund would hold more than 10% of the voting securities of such
issuer, or (c) more than 25% of a Fund's total assets (taken at current
value) would be concentrated in any one industry. There is, however, no
limitation on investments in obligations issued or guaranteed by the U.S.
government, its agencies or instrumentalities. The Money Market Fund only
may invest up to 75% of its assets in all finance companies as a group, all
banks and bank holding companies as a group, and all utility companies as a
group, when in the opinion of management, yield differentials and money
market conditions suggest and when cash is available for such investment and
instruments are available for purchase which fulfill the Money Market Fund's
objective in terms of quality and marketability.
Set forth below is the fundamental policy with respect to diversification as
proposed to be adopted by Shareholders of each Fund:
[No Fund may]: Purchase securities of any one issuer, other than
obligations issued or guaranteed by the U.S. Government, its agencies or
instrumentalities, if, immediately after such purchase, more than 5% of the
Fund's total assets would be invested in such issuer or the Fund would hold
more than 10% of the outstanding voting securities of the issuer, except
that 25% or less of the Fund's total assets may be invested without regard
to such limitations. There is no limit to the percentage of assets that may
be invested in U.S. Treasury bills, notes, or other obligations issued or
guaranteed by the U.S. Government, its agencies or instrumentalities. The
Money Market Fund will be deemed to be in compliance with this restriction
so long as it is in compliance with Rule 2a-7 under the 1940 Act, as such
Rule may be amended from time to time.
24
<PAGE> 26
Under current policies, a Fund may not invest more than 5% of its total
assets in any one issuer ("5% issuer test"). In addition, a Fund may not invest
in an issuer if the investment would result in the Fund owning more than 10% of
the outstanding voting securities of an issuer ("10% securities test"). U.S.
Government securities and securities issued by its agencies or instrumentalities
are not included. The significant difference between the current policy and
proposed policy is that under the proposed policy, the 5% issuer test and the
10% securities test would only apply to 75% of the Fund's assets, thereby giving
the Fund the investment flexibility to exceed the 5% issuer test and the 10%
securities test for the remaining 25% of the Fund's assets. Also, the Money
Market Fund will be deemed in compliance with this restriction so long as it
complies with Rule 2a-7 under the 1940 Act. Rule 2a-7 establishes
diversification requirements that money market funds must meet in order to hold
themselves out as money market funds.
The added flexibility to make an investment resulting in more than 5% of the
Fund's assets being invested in one issuer would enable the Fund to take
advantage of potential investment opportunities where, for example, the
particular issuer appears very attractive because of its investment potential,
its high creditworthiness, or any other compelling financial reasons. In
addition, where a relatively low supply of other comparable issuers exists, the
Fund could be interested in investing more in the limited number of issuers
available. In short, circumstances can arise where the best interests of
Shareholders can be served by exceeding the 5% issuer test. Similarly, as the
Fund increases in size, its portfolio purchases get larger and could from time
to time comprise more than 10% of the voting securities of a small issuer.
Accordingly, the proposed change would give a Fund flexibility in its
investments as it grows.
The Funds have no present plan to change their investment approach if the
proposal is adopted. Adoption of the proposal would simply provide helpful
flexibility for possible use under the right circumstances in the future. In
addition, the investment limitations of the proposed policy follow the
definition of a "diversified" investment company for purposes of the 1940 Act.
The Funds intend to implement and monitor the operation of the new policy
subject to market, regulatory or other developments.
Approval of the amendment to a Fund's fundamental policy with respect to
diversification requires the affirmative vote of a majority of the outstanding
voting securities of that Fund, which is defined above under "PROPOSAL 3 --
Amendment of Investment Advisory Agreement." If the proposal is not approved by
Shareholders of a Fund, the current fundamental policy will remain unchanged for
that Fund.
PROPOSAL 6.B. - AMENDMENT OF FUNDAMENTAL POLICY REGARDING PURCHASING
SECURITIES ON MARGIN
Each Fund's fundamental policy on purchasing securities on margin currently
provides that:
[No Fund may]: Purchase securities on margin, but the Trust may obtain such
credits as may be necessary for the clearance of purchases and sales of
securities.
Set forth below is the fundamental policy with respect to purchasing
securities on margin as proposed to be adopted by Shareholders of each Fund:
25
<PAGE> 27
[No Fund may]: Purchase securities on margin, but the Trust may obtain such
credits as may be necessary for the clearance of purchases and sales of
securities and except as may be necessary to make margin payments in
connection with derivative securities transactions.
Margin purchases involve the purchase of securities with money borrowed from
a broker. "Margin" is the cash or eligible securities that the borrower places
with its broker as collateral against this loan.
Under current policies, the Funds may not purchase securities on margin, but
may obtain such credits as may be necessary to clear purchases and sales of
securities. Under the proposed policy the Funds may purchase securities on
margin when necessary to make margin payments in connection with derivative
securities transactions, such as futures transactions.
The Funds have no present plan to change their investment approach if the
proposal is adopted. Adoption of the proposal would simply provide helpful
flexibility for possible use under the right circumstances in the future.
Approval of the amendment to a Fund's fundamental policy with respect to
purchasing securities on margin requires the affirmative vote of a majority of
the outstanding voting securities of that Fund, which is defined above under
"PROPOSAL 3 -- Approval of a New Investment Advisory Agreement." If the
proposal is not approved by Shareholders of a Fund, the current fundamental
policy will remain unchanged for that Fund.
PROPOSAL 6.C. - AMENDMENT OF FUNDAMENTAL
POLICY REGARDING INVESTMENTS IN
REAL ESTATE AND COMMODITIES
Each Fund's fundamental policy on investments in real estate and commodities
currently provides that:
[No Fund may]:Purchase or retain real estate (including limited partnership
interests, but excluding securities of companies which deal in real estate
or interest therein), mineral leases, commodities or commodity contracts.
Set forth below are the fundamental policies with respect to investment in
real estate and commodities as proposed to be adopted by Shareholders of each
Fund:
[No Fund may]:Purchase or sell real estate unless acquired as a result of
ownership of securities or instruments, but this restriction shall not
prohibit the Fund from purchasing or selling securities issued by entities
or investment vehicles that own or deal in real estate or interests therein
or instruments secured by real estate or interests therein.
Purchase or sell commodities or commodities contracts, except to the extent
disclosed in the current Prospectus of such Fund.
26
<PAGE> 28
Under current policies, the Funds may not purchase or retain real estate,
including limited partnerships, but may invest in securities of companies which
deal in real estate. In addition, the Funds may not purchase or retain mineral
leases, commodities or commodity contracts. Under the proposed policy the Funds
may not purchase or sell real estate unless acquired as a result of ownership of
securities or investments, but the Funds may purchase or sell securities issued
by entities or investment vehicles that own or deal in real estate or in
instruments secured by real estate. In addition, the proposed policy would
permit the Funds to purchase or sell commodities or commodities contracts (such
as futures and options on futures)to the extent disclosed in the current
Prospectus of such Fund.
The 1940 Act requires that a fund state a formal fundamental investment
policy regarding investment in commodities. In addition, the Commodities
Futures Trading Commission and the SEC have general restrictions on commodities
purchases. Any financial futures contract or related option is considered to be
a commodity. Other types of financial instruments such as swaps might also be
deemed to be commodities. The amendment is being proposed to enable the Funds to
invest in financial futures contracts and related options for hedging and other
permissible purposes and to clarify that certain practices in which the Funds
engage (such as when issued securities) or might in the future engage (such as
foreign currency futures contracts and related options) are not subject to this
restriction.
The Funds do not currently intend to purchase or sell commodities or
commodities contracts. In the event that the Trustees decide in the future it
is desirable for the Funds to engage in this type of investment, the Funds'
Prospectus will be revised accordingly, including the addition of appropriate
risk disclosure.
Approval of the amendments to a Fund's fundamental policy requires the
affirmative vote of a majority of the outstanding voting securities of that
Fund, which is defined above under "PROPOSAL 3 -- Approval of a New Investment
Advisory Agreement." If the proposal is not approved by Shareholders of a
Fund, the current fundamental policy will remain unchanged for that Fund.
PROPOSALS 6.D., 6.E. AND 6.F., IF APPROVED, WILL RECLASSIFY THE FUNDS'
FUNDAMENTAL POLICY ON MAKING SHORT SALES OF SECURITIES, INVESTING IN RESTRICTED
SECURITIES AND INVESTING IN OTHER INVESTMENT COMPANIES, RESPECTIVELY, AS
NON-FUNDAMENTAL POLICIES.
Fundamental investment policies are policies which may not be amended or
deleted without prior Shareholder approval. By reclassifying the following
policies as non-fundamental policies, the Trustees of the Trust will be able to
change or delete them without Shareholder approval. It is anticipated that if
Shareholders approve Proposals 6.d., 6.e. and 6.f., then the Trustees will
modify certain of the policies as described below.
PROPOSAL 6.D. - RECLASSIFICATION OF FUNDAMENTAL
POLICY PROHIBITING MAKING SHORT SALES OF SECURITIES
Each Fund's fundamental policy on making short sales of securities currently
provides that [no Fund may]: make short sales of securities.
27
<PAGE> 29
It is proposed that this fundamental policy be reclassified as a
non-fundamental policy if this proposal is approved by Shareholders of the
Funds.
In a short sale, an investor sells a borrowed security and has a
corresponding obligation to the lender to return the identical security. The
proposed non-fundamental investment restriction could be changed without a vote
of Shareholders. The adoption of this proposal will permit the Funds to change
policy in the future in order to make short sales of securities.
Approval of the reclassification of a Fund's fundamental policy with respect
to making short sales of securities requires the affirmative vote of a majority
of the outstanding voting securities of that Fund, which is defined above under
"PROPOSAL 3 -- Approval of a New Investment Advisory Agreement." If the
proposal is not approved by Shareholders of a Fund, the current fundamental
policy will remain unchanged for that Fund.
PROPOSAL 6.E.- RECLASSIFICATION OF FUNDAMENTAL POLICY
REGARDING PURCHASING SECURITIES WHICH ARE
RESTRICTED AS TO DISPOSITION
Each Fund's fundamental policy on purchasing securities which are restricted
as to disposition currently provides that:
[No Fund may]:Invest in securities which are restricted as to disposition
under federal securities law, or securities with other legal or contractual
restrictions on resale (except for repurchase agreements).
Set forth below is the non-fundamental policy with respect to investment in
illiquid securities proposed to be adopted by the Board of Trustees if this
proposal is approved by Shareholders of the Funds:
[No Fund may]:Purchase or otherwise acquire any security if, as a result,
more than 15% [10% with respect to the Money Market Fund] of its net assets
would be invested in securities that are illiquid.
The current restriction prohibits the Funds from investing in securities
whose disposition is restricted under federal securities law or in securities
with other legal or contractual restrictions on resale. The proposed
restriction would reclassify this restriction as non-fundamental and would
permit the Funds to invest up to 15% (10% for the Money Market Fund) of its net
assets in securities that are illiquid.
The proposed policy, if approved, may be changed without Shareholder vote
and complies with the current limitations in the 1940 Act. The proposed policy
will also give the Funds greater flexibility in managing their portfolios.
Approval of the reclassification of a Fund's fundamental policy requires the
affirmative vote of a majority of the outstanding voting securities of that
Fund, which is defined above under
28
<PAGE> 30
"PROPOSAL 3 -- Approval of a New Investment Advisory Agreement." If the
proposal is not approved by Shareholders of a Fund, the current fundamental
policy will remain unchanged for that Fund.
6.F. - RECLASSIFICATION OF FUNDAMENTAL POLICY
REGARDING PURCHASING SECURITIES OF
OTHER INVESTMENT COMPANIES
Each Fund's fundamental policy on purchasing securities of other investment
companies currently provides that:
[No Fund may]:Purchase securities issued by any registered investment
company, except by purchase in the open market where no commission or profit
to a sponsor or dealer results from such purchase other than the customary
broker's commission, or except when such purchase, though not made in the
open market, is part of a plan of merger or consolidation. The Trust shall
not, however, purchase the securities of any registered investment companies
if such purchase at the time thereof would cause more than 10% of the total
assets of a Fund, taken at current value, to be invested in the securities
of such issuers. Further, the Trust shall not purchase securities issued by
any open-end investment company.
Set forth below is the non-fundamental policy with respect to investment in
securities of other investment companies proposed to be adopted by the Board of
Trustees if this proposal is approved by Shareholders of the Funds:
[No Fund may:] Purchase securities of other investment companies, except
(a) in connection with a merger, consolidation, acquisition or
reorganization, and (b) to the extent permitted by the 1940 Act, or any
rules or regulations thereunder, or pursuant to any exemptions therefrom.
The current restriction prohibits the Funds from purchasing securities
issued by any other open-end registered investment companies and severely limits
a Fund's ability to invest in other types of investment companies.
This change is being proposed to provide the Funds with additional
investment flexibility. The change would permit the Funds to purchase
securities of other investment companies in connection with a merger,
consolidation, acquisition or reorganization and to the extent permitted by the
1940 Act and any exemptions therefrom.
Approval of the reclassification of a Fund's fundamental policy requires the
affirmative vote of a majority of the outstanding voting securities of that
Fund, which is defined above under "PROPOSAL 3 -- Approval of a New Investment
Advisory Agreement." If the proposal is not approved by Shareholders of a
Fund, the current fundamental policy will remain unchanged for that Fund.
PROPOSALS 6.G., 6.H., 6.I. AND 6.J., IF APPROVED, WILL DELETE THE FUNDS'
FUNDAMENTAL POLICIES REGARDING INVESTING IN COMPANIES WITH LESS THAN THREE
YEARS CONTINUOUS OPERATIONS, INVESTING IN COMPANIES FOR THE PURPOSE OF
EXERCISING CONTROL OR MANAGEMENT, PROHIBITING THE WRITING OF
29
<PAGE> 31
PUT OR CALL OPTIONS AND PROHIBITING PURCHASING OR RETAINING SECURITIES WHICH MAY
BE HELD BY THE TRUST'S OFFICERS OR TRUSTEES OR BY THE FUND'S INVESTMENT ADVISER,
RESPECTIVELY. MOST OF THESE REQUIREMENTS WERE REQUIRED BY STATE BLUE SKY LAWS
THAT HAVE NOW BEEN PRE-EMPTED BY FEDERAL SECURITIES LAW.
PROPOSAL 6.G. - DELETION OF FUNDAMENTAL POLICY REGARDING
INVESTMENT IN COMPANIES WITH A RECORD OF
LESS THAN THREE YEARS CONTINUOUS OPERATIONS
Each Fund's fundamental policy on operating history currently provides that
no Fund may: invest more than 5% of a Fund's total assets (taken a current
value) in companies which, including predecessors, have a record of less than
three years continuous operation. If approved by Shareholders, the foregoing
policy would be deleted altogether as a policy of the Funds.
The 1940 Act does not impose any limitation upon investment in securities of
issuers with a limited operating history. As noted above, this requirement was
required by state blue sky laws that have now been pre-empted by Federal
securities law. The change is being proposed to permit the Funds to invest in
such securities to the extent that the Trust believes that such investment would
be beneficial to the Funds and would not involve undue risk.
Approval of the deletion of this fundamental policy for a Fund requires the
affirmative vote of a majority of the outstanding voting securities of that
Fund, which is defined above under "PROPOSAL 3 -- Approval of a New Investment
Advisory Agreement." If the proposal is not approved by Shareholders of a Fund,
the current fundamental policy will remain unchanged for that Fund.
PROPOSAL 6.H. - DELETION OF FUNDAMENTAL POLICY REGARDING
INVESTING IN COMPANIES FOR PURPOSE OF EXERCISING
CONTROL OR MANAGEMENT
Each Fund's fundamental policy on investing in companies for the purpose of
exercising control currently provides that no Fund may: invest in companies for
the purpose of exercising control or management. If approved by Shareholders,
the foregoing policy would be deleted altogether as a policy of the Funds.
The 1940 Act does not impose any restriction on investment for this purpose.
The change is being proposed to permit the Funds to invest in such securities to
the extent that the Trust believes that such investment would be beneficial to
the Funds and would not involve undue risk.
Approval of the deletion of a Fund's fundamental policy with respect to
investing in companies for the purpose of exercising control or management
requires the affirmative vote of a majority of the outstanding voting securities
of that Fund, which is defined above under "PROPOSAL 3 -- Approval of a New
Investment Advisory Agreement." If the proposal is not approved by Shareholders
of a Fund, the current fundamental policy will remain unchanged for that Fund.
30
<PAGE> 32
PROPOSAL 6.I. - DELETION OF FUNDAMENTAL POLICY
REGARDING PURCHASING OPTIONS
Each Fund's fundamental policy on purchasing options currently provides that
no Fund may: "[w]rite or purchase any put or call options." If approved by
Shareholders, the foregoing policy would be deleted altogether as a policy of
that Fund.
If approved the deletion of the fundamental policy will allow the Funds to
write or purchase any put or call options in accordance with the 1940 Act and
will give the Funds more flexibility in managing their respective investment
portfolios.
Approval of the deletion of a Fund's fundamental policy with respect to
options requires the affirmative vote of a majority of the outstanding voting
securities of that Fund, which is defined above under "PROPOSAL 3 -- Approval of
a New Investment Advisory Agreement." If the proposal is not approved by
Shareholders of a Fund, the current fundamental policy will remain unchanged for
that Fund.
PROPOSAL 6.J. - DELETION OF FUNDAMENTAL POLICY REGARDING
PURCHASING OR RETAINING SECURITIES WHICH MAY BE HELD BY
THE TRUST'S OFFICERS OR TRUSTEES OR BY NAS
Each Fund's fundamental policy on purchasing or retaining securities which
may be held by the Trust's officers or trustees or by NAS currently provides
that:
[No Fund may]: Purchase or retain securities of any issuer, any of whose
officers, directors or security holders is a trustee, director, or officer
of the Trust, or of the Adviser, if or so long as, one or more of such
persons owns beneficially more than 1/2% of any class of securities, taken
at market value, of such issuer, and such persons owning more than 1/2% of
such securities together own beneficially more than 5% of any class of
securities of such issuer, taken at market value.
If approved by Shareholders, the foregoing policy would be deleted
altogether as a policy of that Fund.
The 1940 Act does not impose any restrictions on the purchase or retention
of these securities. If approved, the deletion of this restriction will allow
the Funds additional flexibility in managing their portfolios and will simplify
compliance monitoring since this restriction is difficult to monitor.
Approval of the deletion of this fundamental policy for a Fund requires the
affirmative vote of a majority of the outstanding voting securities of that
Fund, which is defined above under "PROPOSAL 3 -- Approval of a New Investment
Advisory Agreement." If the proposal is not approved by Shareholders of a
Fund, the current fundamental policy will remain unchanged for that Fund.
31
<PAGE> 33
PRINCIPAL HOLDERS OF VOTING SECURITIES
The following table sets forth certain information as of July 30, 1997,
for each Portfolio with respect to each person or group known by the Trust to be
the beneficial owner of more than 5% of any class of the Trust's outstanding
voting securities:
<TABLE>
<CAPTION>
AMOUNT AND
----------
NATURE OF THE PERCENT
------------- --------
TITLE OF CLASS NAME AND ADDRESS OF BENEFICIAL OWNER BENEFICIAL OWNERSHIP OF CLASS
-------------- ------------------------------------ -------------------- --------
<S> <C> <C> <C>
[5% beneficial ownership information to be added here.]
</TABLE>
(1) The designated beneficial owner possesses on behalf of its underlying
accounts voting or investment power with respect to these shares.
As of July 30, 1997, the Trustees and officers of the Trust as a group
owned beneficially fewer than 1% of the outstanding Shares of the Trust or of
any of the current Portfolios. {May need to add this information to the Trustee
information table if any trustees owns shares of a Portfolio.}
SHAREHOLDER PROPOSALS
Any Shareholder proposal intended to be presented at any future Meeting of
Shareholders must be received by the Trust at its principal office a reasonable
time before the Trust's solicitation of proxies for such meeting in order for
such proposal to be considered for inclusion in the Trust's Proxy Statement and
form or forms of Proxy relating to such meeting.
ADDITIONAL INFORMATION
With respect to the actions to be taken by the Shareholders of the Trust on
the matters described in this Proxy Statement, (i) the presence in person or by
proxy of Shareholders entitled to cast a majority of the shares of the Trust
entitled to be cast at the Meeting on a particular matter shall constitute a
quorum for purposes of voting upon such matters at the Meeting, provided that no
action required by law or the Trust's Declaration of Trust to be taken by the
holders of a designated proportion of Shares may be authorized or taken by a
lesser proportion; and (ii) abstentions and broker non-votes, as described
below, shall be treated as votes present for purposes of determining whether a
quorum exists, but, for purposes of determining whether an issue has been
approved, abstentions and broker non-votes will neither be counted as for or
against the particular issue. As used above, broker non-votes are Shares
for which a broker holding such Shares for a beneficial owner has not received
instructions from the beneficial owner and may not exercise discretionary voting
power with respect thereto, although such broker may have been able to vote such
Shares on other matters at the Meeting for which it has discretionary authority
or instructions from the beneficial owner. The Trust will bear all costs in
connection with the solicitation of proxies from Shareholders of the current
Portfolios. It is not expected that there will be any solicitation other than
by mail.
By Order of the Trustees
August 19, 1997
Rae M. Pollina, Secretary
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<PAGE> 34
EXHIBIT A
INVESTMENT ADVISORY AGREEMENT
THIS AGREEMENT is made and entered into on this ___ day of November,
1997 between NATIONWIDE SEPARATE ACCOUNT TRUST (the "Trust"), a Massachusetts
business trust, and NATIONWIDE ADVISORY SERVICES, INC. (the "Adviser"), an Ohio
corporation registered under the Investment Advisers Act of 1940 (the "Advisers
Act").
W I T N E S S E T H :
WHEREAS, the Trust is registered with the Securities and Exchange
Commission (the "SEC") as an open-end management investment company under the
Investment Company Act of 1940 (the "1940 Act");
WHEREAS, the Trust desires to retain the Adviser to furnish certain
investment advisory services, as described herein, with respect to certain of
the series of the Trust, all as now are or may be hereafter listed on Exhibit A
to this Agreement (each, a "Fund"); and
WHEREAS, the Adviser represents that it is willing and possesses legal
authority to render such services subject to the terms and conditions set forth
in this Agreement.
NOW, THEREFORE, the Trust and the Adviser do mutually agree and
promise as follows:
1. APPOINTMENT AS ADVISER. The Trust hereby appoints the Adviser to
act as investment adviser to each Fund subject to the terms and conditions set
forth in this Agreement. The Adviser hereby accepts such appointment and agrees
to furnish the services hereinafter described for the compensation provided for
in this Agreement.
2. DUTIES OF ADVISER.
(a) INVESTMENT MANAGEMENT SERVICES. (1) Subject to the
supervision of the Trust's Board of Trustees (and except as otherwise
permitted under the terms of any exemptive relief obtained by the
Adviser from the Securities and Exchange Commission, or by rule or
regulation), the Adviser will provide, or arrange for the provision
of, a continuous investment program and overall investment strategies
for each Fund, including investment research and management with
respect to all securities and investments and cash equivalents in each
Fund. The Adviser will determine, or arrange for others to determine,
from time to time what securities and other investments will be
purchased, retained or sold by each Fund and will implement, or
arrange for others to implement, such determinations through the
placement, in the name of a Fund, of orders for the execution of
portfolio transactions with or through such brokers or dealers as may
be so selected. The Adviser will provide, or arrange for the provision
of, the services under this Agreement in accordance with the stated
investment policies and restrictions of each Fund as set forth in that
Fund's current prospectus and
<PAGE> 35
statement of additional information as currently in effect and as
supplemented or amended from time to time (collectively referred to
hereinafter as the "Prospectus") and subject to the directions of the
Trust's Board of Trustees.
(2) Subject to the provisions of this Agreement and the 1940
Act and any exemptions thereto, the Adviser intends to, and is
authorized to, appoint one or more qualified subadvisers (each a
"Subadviser") to provide each Fund with certain services required by
this Agreement. Each Subadviser shall have such investment discretion
and shall make all determinations with respect to the investment of a
Fund's assets as shall be assigned to that Subadviser by the Adviser
and the purchase and sale of portfolio securities with respect to
those assets and shall take such steps as may be necessary to
implement its decisions. The Adviser shall not be responsible or
liable for the investment merits of any decision by a Subadviser to
purchase, hold, or sell a security for a Fund.
(3) Subject to the supervision and direction of the Trustees,
the Adviser shall (i) have overall supervisory responsibility for the
general management and investment of a Fund's assets; (ii) determine
the allocation of assets among the Subadvisers, if any; and (iii) have
full investment discretion to make all determinations with respect to
the investment of Fund assets not otherwise assigned to a Subadviser.
(4) The Adviser shall research and evaluate each Subadviser,
if any, including (i) performing initial due diligence on prospective
Subadvisers and monitoring each Subadviser's ongoing performance; (ii)
communicating performance expectations and evaluations to the
Subadvisers; and (iii) recommending to the Trust's Board of Trustees
whether a Subadviser's contract should be renewed, modified or
terminated. The Adviser shall also recommend changes or additions to
the Subadvisers and shall compensate the Subadvisers.
(5) The Adviser shall provide to the Trust's Board of
Trustees such periodic reports concerning a Fund's business and
investments as the Board of Trustees shall reasonably request.
(b) COMPLIANCE WITH APPLICABLE LAWS AND GOVERNING DOCUMENTS.
In the performance of its duties and obligations under this Agreement,
the Adviser shall act in conformity with the Trust's Declaration of
Trust and By-Laws and the Prospectus and with the instructions and
directions received from the Trustees of the Trust and will conform to
and comply with the requirements of the 1940 Act, the Internal Revenue
Code of 1986, as amended (the "Code") (including the requirements for
qualification as a regulated investment company) and all other
applicable federal and state laws and regulations.
The Adviser acknowledges and agrees that subject to the
supervision and directions of the Trust's Board of Trustees, it shall
be solely responsible for compliance with all disclosure requirements
under all applicable federal and state laws and regulations relating
to
2
<PAGE> 36
the Trust or a Fund, including, without limitation, the 1940 Act, and
the rules and regulations thereunder, except that each Subadviser
shall have liability in connection with information furnished by the
Subadviser to a Fund or to the Adviser.
(c) CONSISTENT STANDARDS. It is recognized that the Adviser
will perform various investment management and administrative services
for entities other than the Trust and the Funds; in connection with
providing such services, the Adviser agrees to exercise the same skill
and care in performing its services under this Agreement as the
Adviser exercises in performing similar services with respect to the
other fiduciary accounts for which the Adviser has investment
responsibilities.
(d) BROKERAGE. The Adviser is authorized, subject to the
supervision of the Trust's Board of Trustees, to establish and
maintain accounts on behalf of each Fund with, and place orders for
the purchase and sale of assets not allocated to a Subadviser, with or
through, such persons, brokers or dealers ("brokers") as Adviser may
select and negotiate commissions to be paid on such transactions. In
the selection of such brokers and the placing of such orders, the
Adviser shall seek to obtain for a Fund the most favorable price and
execution available, except to the extent it may be permitted to pay
higher brokerage commissions for brokerage and research services, as
provided below. In using its reasonable efforts to obtain for a Fund
the most favorable price and execution available, the Adviser, bearing
in mind the Fund's best interests at all times, shall consider all
factors it deems relevant, including price, the size of the
transaction, the nature of the market for the security, the amount of
the commission, if any, the timing of the transaction, market prices
and trends, the reputation, experience and financial stability of the
broker involved, and the quality of service rendered by the broker in
other transactions. Subject to such policies as the Trustees may
determine, the Adviser shall not be deemed to have acted unlawfully or
to have breached any duty created by this Agreement or otherwise
solely by reason of its having caused a Fund to pay a broker that
provides brokerage and research services (within the meaning of
Section 28(e) of the Securities Exchange Act of 1934) to the Adviser
an amount of commission for effecting a Fund investment transaction
that is in excess of the amount of commission that another broker
would have charged for effecting that transaction if, but only if, the
Adviser determines in good faith that such commission was reasonable
in relation to the value of the brokerage and research services
provided by such broker or dealer, viewed in terms of either that
particular transaction or the overall responsibilities of the Adviser
with respect to the accounts as to which it exercises investment
discretion.
It is recognized that the services provided by such brokers
may be useful to the Adviser in connection with the Adviser's services
to other clients. On occasions when the Adviser deems the purchase or
sale of a security to be in the best interests of a Fund as well as
other clients of the Adviser, the Adviser, to the extent permitted by
applicable laws and regulations, may, but shall be under no obligation
to, aggregate the securities to be sold or purchased in order to
obtain the most favorable price or lower brokerage commissions and
efficient execution. In such event, allocation of securities so sold
or purchased, as well as the
3
<PAGE> 37
expenses incurred in the transaction, will be made by the Adviser in
the manner the Adviser considers to be the most equitable and
consistent with its fiduciary obligations to each Fund and to such
other clients.
(e) SECURITIES TRANSACTIONS. The Adviser will not purchase
securities or other instruments from or sell securities or other
instruments to a Fund; PROVIDED, HOWEVER, the Adviser may purchase
securities or other instruments from or sell securities or other
instruments to a Fund if such transaction is permissible under
applicable laws and regulations, including, without limitation, the
1940 Act and the Advisers Act and the rules and regulations
promulgated thereunder or any exemption therefrom.
The Adviser agrees to observe and comply with Rule 17j-1
under the 1940 Act and the Trust's Code of Ethics, as the same may be
amended from time to time.
(f) BOOKS AND RECORDS. In accordance with the 1940 Act and
the rules and regulations promulgated thereunder, the Adviser shall
maintain separate books and detailed records of all matters pertaining
to the Funds and the Trust (the "Fund's Books and Records"),
including, without limitation, a daily ledger of such assets and
liabilities relating thereto and brokerage and other records of all
securities transactions. The Adviser acknowledges that the Fund's
Books and Records are property of the Trust. In addition, the Fund's
Books and Records shall be available to the Trust at any time upon
request and shall be available for telecopying without delay to the
Trust during any day that the Funds are open for business.
3. EXPENSES. During the term of this Agreement, the Adviser will pay
all expenses incurred by it in connection with its activities under this
Agreement other than the cost of securities, commodities and other investments
(including brokerage commissions and other transaction charges, if any)
purchased for a Fund. The Adviser shall, at its sole expense, employ or
associate itself with such persons as it believes to be particularly fitted to
assist it in the execution of its duties under this Agreement. The Adviser
shall be responsible for the expenses and costs for the officers of the Trust
and the Trustees of Trust who are "interested persons" (as defined in the 1940
Act) of the Adviser.
It is understood that the Trust will pay all of its own expenses
including, without limitation, (1) all charges and expenses of any custodian or
depository appointed by the Trust for the safekeeping of its cash, securities
and other assets, (2) all charges and expenses paid to an administrator
appointed by the Trust to provide administrative or compliance services, (3)
the charges and expenses of any transfer agents and registrars appointed by the
Trust, (4) the charges and expenses of independent certified public accountants
and of general ledger accounting and internal reporting services for the Trust,
(5) the charges and expenses of dividend and capital gain distributions, (6)
the compensation and expenses of Trustees of the Trust who are not "interested
persons" of the Adviser, (7) brokerage commissions and issue and transfer taxes
chargeable to the Trust in connection with securities transactions to which the
Trust is a party, (8) all taxes and fees payable by the Trust to Federal, State
or other governmental agencies, (9) the cost of stock
4
<PAGE> 38
certificates representing shares of the Trust, (10) all expenses of
shareholders' and Trustees' meetings and of preparing, printing and
distributing prospectuses and reports to shareholders, (11) charges and
expenses of legal counsel for the Trust in connection with legal matters
relating to the Trust, including without limitation, legal services rendered in
connection with the Trust's existence, financial structure and relations with
its shareholders, (12) insurance and bonding premiums, (13) association
membership dues, (14) bookkeeping and the costs of calculating the net asset
value of shares of the Trust's Funds, and (15) expenses relating to the
issuance, registration and qualification of the Trust's shares.
4. COMPENSATION. For the services provided and the expenses assumed
with respect to a Fund pursuant to this Agreement, the Adviser will be entitled
to the fee listed for each Fund on Exhibit A. Such fees will be computed daily
and payable monthly at an annual rate based on a Fund's average daily net
assets.
The method of determining net assets of a Fund for purposes hereof
shall be the same as the method of determining net assets for purposes of
establishing the offering and redemption price of the Shares as described in
each Fund's Prospectus. If this Agreement shall be effective for only a portion
of a month, the aforesaid fee shall be prorated for the portion of such month
during which this Agreement is in effect.
Notwithstanding any other provision of this Agreement, the Adviser may
from time to time agree not to impose all or a portion of its fee otherwise
payable hereunder (in advance of the time such fee or portion thereof would
otherwise accrue). Any such fee reduction may be discontinued or modified by
the Adviser at any time.
5. REPRESENTATIONS AND WARRANTIES OF ADVISER. The Adviser represents
and warrants to the Trust as follows:
(a) The Adviser is registered as an investment adviser under
the Advisers Act;
(b) The Adviser is a corporation duly organized, validly
existing and in good standing under the laws of the State of Ohio with
the power to own and possess its assets and carry on its business as
it is now being conducted;
(c) The execution, delivery and performance by the Adviser of
this Agreement are within the Adviser's powers and have been duly
authorized by all necessary action on the part of its shareholders
and/or directors, and no action by or in respect of, or filing with,
any governmental body, agency or official is required on the part of
the Adviser for the execution, delivery and performance by the Adviser
of this Agreement, and the execution, delivery and performance by the
Adviser of this Agreement do not contravene or constitute a default
under (i) any provision of applicable law, rule or regulation, (ii)
the Adviser's governing instruments, or (iii) any agreement, judgment,
injunction, order, decree or other instrument binding upon the
Adviser;
5
<PAGE> 39
(d) The Form ADV of the Adviser previously provided to the
Trust is a true and complete copy of the form filed with the SEC and
the information contained therein is accurate and complete in all
material respects and does not omit to state any material fact
necessary in order to make the statements made, in light of the
circumstances under which they were made, not misleading.
6. SURVIVAL OF REPRESENTATIONS AND WARRANTIES; DUTY TO UPDATE
INFORMATION. All representations and warranties made by the Adviser pursuant to
Section 5 shall survive for the duration of this Agreement and the parties
hereto shall promptly notify each other in writing upon becoming aware that any
of the foregoing representations and warranties are no longer true.
7. LIABILITY AND INDEMNIFICATION.
(a) LIABILITY. In the absence of wilful misfeasance, bad
faith or gross negligence on the part of the Adviser or a reckless
disregard of its duties hereunder, the Adviser shall not be subject to
any liability to a Fund or the Trust, for any act or omission in the
case of, or connected with, rendering services hereunder or for any
losses that may be sustained in the purchase, holding or sale of Fund
assets; PROVIDED, HOWEVER, that nothing herein shall relieve the
Adviser from any of its obligations under applicable law, including,
without limitation, the federal and state securities laws.
(b) INDEMNIFICATION. The Adviser shall indemnify the Trust
and its officers and trustees, for any liability and expenses,
including attorneys fees, which may be sustained as a result of the
Adviser's wilful misfeasance, bad faith, gross negligence, reckless
disregard of its duties hereunder or violation of applicable law,
including, without limitation, the federal and state securities laws.
8. DURATION AND TERMINATION.
(a) DURATION. Unless sooner terminated, this Agreement shall
continue until __________, 1999, and thereafter shall continue
automatically for successive annual periods, provided such continuance
is specifically approved at least annually by the Trust's Board of
Trustees or the vote of the lesser of (a) 67% of the shares of a Fund
represented at a meeting if holders of more than 50% of the
outstanding shares of the Fund are present in person or by proxy or
(b) more than 50% of the outstanding shares of the Fund; PROVIDED that
in either event its continuance also is approved by a majority of the
Trust's Trustees who are not "interested persons" (as defined in the
1940 Act) of any party to this Agreement, by vote cast in person at a
meeting called for the purpose of voting on such approval.
(b) TERMINATION. Notwithstanding whatever may be provided
herein to the contrary, this Agreement may be terminated at any time,
without payment of any penalty by vote of a majority of the Trust's
Board of Trustees, or by vote of a majority of the outstanding
6
<PAGE> 40
voting securities of a Fund, or by the Adviser, in each case, not less
than sixty (60) days' written notice to the other party.
This Agreement shall not be assigned (as such term is defined in the
1940 Act) and shall terminate automatically in the event of its assignment.
9. SERVICES NOT EXCLUSIVE. The services furnished by the Adviser
hereunder are not to be deemed exclusive, and the Adviser shall be free to
furnish similar services to others so long as its services under this Agreement
are not impaired thereby. It is understood that the action taken by the Adviser
under this Agreement may differ from the advice given or the timing or nature
of action taken with respect to other clients of the Adviser, and that a
transaction in a specific security may not be accomplished for all clients of
the Adviser at the same time or at the same price.
10. AMENDMENT. This Agreement may be amended by mutual consent of the
parties, provided that the terms of each such amendment shall be approved by
the Trust's Board of Trustees or by a vote of a majority of the outstanding
voting securities of a Fund (as required by the 1940 Act).
11. CONFIDENTIALITY. Subject to the duties of the Adviser and the
Trust to comply with applicable law, including any demand of any regulatory or
taxing authority having jurisdiction, the parties hereto shall treat as
confidential all information pertaining to a Fund and the Trust and the actions
of the Adviser and the Funds in respect thereof.
12. NOTICE. Any notice that is required to be given by the parties to
each other under the terms of this Agreement shall be in writing, delivered, or
mailed postpaid to the other party, or transmitted by facsimile with
acknowledgment of receipt, to the parties at the following addresses or
facsimile numbers, which may from time to time be changed by the parties by
notice to the other party:
(a) If to the Adviser:
Nationwide Advisory Services, Inc.
One Nationwide Plaza, 25-T
Columbus, OH 43215
Attention: James F. Laird, Jr.
Facsimile: (614) 249-7424
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<PAGE> 41
(b) If to the Trust:
Nationwide Separate Account Trust
One Nationwide Plaza, 25-T
Columbus, OH 43215
Attention: James F. Laird, Jr.
Facsimile: (614) 249-7424
13. JURISDICTION. This Agreement shall be governed by and construed to
be in accordance with substantive laws of the State of Ohio without reference
to choice of law principles thereof and in accordance with the 1940 Act. In the
case of any conflict, the 1940 Act shall control.
14. COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original, all of which shall
together constitute one and the same instrument.
15. CERTAIN DEFINITIONS. For the purposes of this Agreement,
"interested person," "affiliated person," "assignment" shall have their
respective meanings as set forth in the 1940 Act, subject, however, to such
exemptions as may be granted by the SEC.
16. CAPTIONS. The captions herein are included for convenience of
reference only and shall be ignored in the construction or interpretation
hereof.
17. SEVERABILITY. If any provision of this Agreement shall be held or
made invalid by a court decision or applicable law, the remainder of the
Agreement shall not be affected adversely and shall remain in full force and
effect.
18. NATIONWIDE SEPARATE ACCOUNT TRUST AND ITS TRUSTEES. The terms
"Nationwide Separate Account Trust" and the "Trustees of Nationwide Separate
Account Trust" refer respectively to the Trust created and the Trustees, as
trustees but not individually or personally, acting from time to time under a
Declaration of Trust dated as of June 30, 1981, as has been or may be amended
from time to time, and to which reference is hereby made and a copy of which is
on file at the office of the Secretary of State of The Commonwealth of
Massachusetts and elsewhere as required by law, and to any and all amendments
thereto so filed or hereafter filed. The obligations of the Trust entered into
in the name or on behalf thereof by any of Nationwide Separate Account Trust's
Trustees, representatives, or agents are not made individually, but only in
their capacities with respect to Nationwide Separate Account Trust. Such
obligations are not binding upon any of the Trustees, shareholders, or
representatives of the Trust personally, but bind only the assets of the Trust.
All persons dealing with any series of Shares of the Trust must look solely to
the assets of the Trust belonging to such series for the enforcement of any
claims against the Trust.
8
<PAGE> 42
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on
the day and year first written above.
ADVISER
NATIONWIDE ADVISORY SERVICES, INC.
By:__________________________________
Name:
Title:
TRUST
NATIONWIDE SEPARATE ACCOUNT TRUST
By:__________________________________
Name:
Title:
9
<PAGE> 43
EXHIBIT A
NATIONWIDE SEPARATE ACCOUNT TRUST
Investment Advisory Agreement
<TABLE>
<CAPTION>
Funds of the Trust Advisory Fees
- ------------------ -------------
<S> <C>
Total Return Fund 0.60% on the first $1 billion in assets
0.575% on assets of more than $1 billion but less
than $2 billion
0.55% on assets of more than $2 billion but less
than $5 billion
0.50% for assets of more than $5 billion
Capital Appreciation Fund 0.60% on the first $1 billion in assets
0.575% on assets of more than $1 billion but less
than $2 billion
0.55% on assets of more than $2 billion but less
than $5 billion
0.50% for assets of more than $5 billion
Government Bond Fund 0.50% on the first $1 billion in assets
0.475% on assets of more than $1 billion but less
than $2 billion
0.45% on assets of more than $2 billion but less
than $5 billion
0.40% for assets of more than $5 billion
Money Market Fund 0.40% on the first $1 billion in assets
0.38% on assets of more than $1 billion but less
than $2 billion
0.36% on assets of more than $2 billion but less
than $5 billion
0.34% for assets of more than $5 billion
</TABLE>
10
<PAGE> 44
Exhibit B
ARTICLE VII
FISCAL YEAR
The fiscal year of the Trust shall begin on the first day of January
in each year and shall end on the last day of December in each year, provided,
however, that the Trustees may from time to time change the fiscal year.
ARTICLE VIII
SEAL
The Trustees may adopt a seal which shall be in such form and shall
have such inscription thereon as the Trustees may from time to time prescribe.
ARTICLE IX
WAIVERS OF NOTICE
Whenever any notice whatever is required to be given by law, the
Amended Declaration or these Amended Bylaws, a waiver thereof in writing,
signed by the person or persons entitled to said notice, whether before or
after the time stated therein, shall be deemed equivalent thereto. A notice
shall be deemed to have been telegraphed, cabled or wirelessed for the purposes
of these Amended Bylaws when it has been delivered to a representative of any
telegraph, cable or wireless company with instruction that it be telegraphed,
cabled or wirelessed. Any notice shall be deemed to be given at the time when
the same shall be mailed, telegraphed, cabled or wirelessed.
ARTICLE X
CUSTODIAN
SECTION 1. APPOINTMENT AND DUTIES. The Trustees shall at all times
employ a bank or trust company in accordance with the 1940 Act as amended and
the rules promulgated thereunder as amended. having a capital, surplus and
undivided profits of at least five million dollars ($5,000,000) as custodian
with authority as its agent, but subject to such restrictions, limitations and
other requirements, if any, as may be contained in the Amended Declaration,
these Amended Bylaws and the 1940 Act:
(1) to hold the securities owned by the Trust and deliver the same
upon written order,
(2) to receive and receipt for any monies due to the Trust and
deposit the same in its own banking department or elsewhere
as the Trustees may direct;
(3) to disburse such funds upon orders or vouchers;
<PAGE> 45
(4) if authorized by the Trustees, to keep the books and accounts of
the Trust and furnish clerical and accounting services, and
(5) if authorized to do so by the Trustees, to compute the net income
of the Trust,
all upon such basis of compensation as may be agreed upon between the Trustees
and the custodian. If so directed by a Majority Shareholder Vote, the custodian
shall deliver and pay over all property of the Trust held by it as specified in
such vote.
The Trustees may also authorize the custodian to employ one or more
sub-custodians from time to time to perform such of the acts and services of
the custodian and upon such terms and conditions, as may be agreed upon between
the custodian and such sub-custodian and approved by the Trustees, provided
that in every case such sub-custodian shall be a bank or trust company
organized under the laws of the United States or one of the states thereof and
having capital, surplus and undivided profits of at least five million dollars
($5,000,000).
SECTION 2. CENTRAL CERTIFICATE SYSTEM. Subject to such rules,
regulations and orders as the Commission may adopt, the Trustees may direct the
custodian to deposit all or any part of the securities owned by the Trust in a
system for the central handling of securities established by a national
securities exchange or a national securities association registered with the
Commission under the Securities Exchange Act of 1934, or such other person as
may be permitted by the Commission, or otherwise in accordance with the 1940
Act, pursuant to which system all securities of any particular class or series
of any issuer deposited within the system are treated as fungible and may be
transferred or pledged by bookkeeping entry without physical delivery of such
securities, provided that all such deposits shall be subject to withdrawal only
upon the order of the Trust.
SECTION 3. ACCEPTANCE OF RECEIPTS IN LIEU OF CERTIFICATES. Subject to
such rules, regulations and orders as the Commission may adopt, the Trustees
may direct the custodian to accept written receipts or other written evidences
indicating purchases of securities held in book-entry form in the Federal
Reserve System in accordance with regulations promulgated by the Board of
Governors of the Federal Reserve System and the local Federal Reserve Banks in
lieu of receipt of certificates representing such securities.
SECTION 4. PROVISIONS OF CUSTODIAN CONTRACT. The following provisions
shall apply to the employment of a custodian pursuant to this Article X and to
any contract entered into with the custodian so employed:
(a) The Trustees shall cause to be delivered to the custodian all
securities owned by the Trust or to which it may become entitled,
and shall order the same to be delivered by the custodian only
upon completion of a sale, exchange, transfer, pledge, or other
disposition thereof, and upon receipt by the custodian of the
consideration therefor or a certificate of deposit or a receipt
of an issuer of its Transfer Agent, all as the Trustees may
generally or from time to time require or approve, or to a
successor custodian, and the Trustees shall cause all funds owned
by the Trust or to which it may become entitled to be paid to the
custodian, and shall order the same disbursed only for investment
against delivery of the securities acquired, or in payment of
<PAGE> 46
expenses, including management compensation, and liabilities of
the Trust, including distributions to Shareholders, or to a
successor custodian, provided, however, that nothing herein shall
prevent delivery of securities for examinations to the broker
selling the same in accord with the "street delivery" custom
whereby such securities are delivered to such broker in exchange
for a delivery receipt exchanged on the same day for an
uncertified check of such broker to be presented on the same day
for certification.
(b) In case of the resignation, removal or inability to serve of any
such custodian, the Trust shall promptly appoint another bank or
trust company meeting the requirements of this Article X as
successor custodian. The agreement with the custodian shall
provide that the retiring custodian shall, upon receipt of notice
of such appointment, deliver the funds and property of the Trust
in its possession to and only to such successor, and that pending
appointment of a successor custodian, or a vote of the
Shareholders to function without a custodian, the custodian shall
not deliver funds and property of the Trust to the Trust, but may
deliver them to a bank or trust company doing business in Boston,
Massachusetts, of its own selection, having an aggregate capital,
surplus and undivided profits (as shown in its last published
report) of at least $5,000,000 as the property of the Trust to be
held under terms similar to those on which they were held by the
retiring custodian.
IT IS PROPOSED THAT ARTICLE X CONSISTS OF ONLY THE FIRST SENTENCE
OF SECTION I, "THE TRUSTEES SHALL AT ALL TIMES EMPLOY A BANK OR
TRUST COMPANY IN ACCORDANCE WITH THE 1940 ACT AS AMENDED AND THE
RULES PROMULGATED THEREUNDER AS AMENDED" AND THAT THE REMAINDER
OF ARTICLE X BE DELETED. EXHIBIT B WILL SHOW THE PROPOSED NEW
LANGUAGE UNDERLINED AND THE PROPOSED LANGUAGE TO BE DELETED WILL
BE STRICKEN THROUGH.
ARTICLE XI
AMENDMENTS
These Amended Bylaws, or any of them, may be altered, amended or
repealed, or new Bylaws may be adopted (a) by Majority Shareholder Vote, or (b)
by the Trustees, provided, however that no Bylaw may be amended, adopted or
repealed by the Trustees if such amendment, adoption or repeal requires,
pursuant to law, the Amended Declaration or these Amended Bylaws, a vote of the
Shareholders or if such amendment, adoption or repeal changes or affects the
provisions of Sections 1 and 4 of Article X, or the provisions of this
Article XI.
IT IS PROPOSED THAT ARTICLE XI END WITH THE WORD "SHAREHOLDERS" ON
LINE 6. EXHIBIT B WILL SHOW THE REMAINDER OF ARTICLE XI STRICKEN
THROUGH.
<PAGE> 47
NATIONWIDE SEPARATE ACCOUNT TRUST PROXY/VOTING INSTRUCTION FORM
SOLICITED ON BEHALF OF THE BOARD OF
TRUSTEES AT THE SPECIAL MEETING OF
SHAREHOLDERS SEPTEMBER 26,
1997
THE UNDERSIGNED CONTRACT OWNER OF A VARIABLE ANNUITY OR VARIABLE LIFE INSURANCE
CONTRACT HEREBY INSTRUCTS NATIONWIDE LIFE INSURANCE COMPANY OR NATIONWIDE LIFE
AND ANNUITY INSURANCE COMPANY TO VOTE THE NATIONWIDE SEPARATE ACCOUNT TRUST
SHARES ATTRIBUTABLE TO HIS OR HER VARIABLE ANNUITY OR VARIABLE LIFE INSURANCE
CONTRACT AS OF JULY 30, 1997, AT THE SPECIAL MEETING OF THE NATIONWIDE SEPARATE
ACCOUNT TRUST TO BE HELD ON SEPTEMBER 26, 1997, THREE NATIONWIDE PLAZA,
COLUMBUS, OHIO 43215 AT 11:15 A.M. AND ANY ADJOURNMENTS THEREOF, AS FOLLOWS:
(THIS PROXY WILL BE VOTED IN ACCORDANCE WITH THE
INSTRUCTIONS INDICATED. IF INSTRUCTIONS ARE NOT
INDICATED AND THIS PROXY IS DULY EXECUTED AND
RETURNED, THIS PROXY WILL BE VOTED "FOR" ALL
PROPOSALS.)
THE UNDERSIGNED HEREBY ACKNOWLEDGES
RECEIPT OF A COPY OF THE NOTICE OF
SPECIAL MEETING AND PROXY STATE-
MENT FOR NATIONWIDE SEPARATE
ACCOUNT TRUST.
DATE , 1997
----------------------
--------------------------------
SIGNATURE OF CONTRACT OWNER(S)
--------------------------------
Where contracts are registered
with joint owners ALL joint owners
should sign. Persons signing as
executors, administrators, trustees,
etc., should so indicate.
<PAGE> 48
1. To elect seven Trustees to hold office until the next meeting of
shareholders or until their successors are duly elected and qualified.
/ / FOR ALL NOMINEES except as / / WITHHOLD AUTHORITY FOR
completed below ALL NOMINEES
(To withhold authority to vote
for any individual nominee,
mark a line through that
nominee's name.)
John C. Bryant Sue A. Doody Robert M. Duncan
Joseph J. Gasper Thomas J. Kerr, IV Douglas F. Kridler
Robert J. Woodward, Jr.
<TABLE>
<CAPTION>
FOR AGAINST ABSTAIN
<S> <C> <C> <C>
2. Ratification of the selection of KPMG / / / / / /
Peat Marwick LLP as auditors for the Trust.
3. Approval of a new Investment Advisory / / / / / /
Agreement between the Trust and
Nationwide Advisory Services, Inc.
(all Funds voting separately
except Small Company Fund).
4. Authorize the Board of Trustees to / / / / / /
appoint, replace or terminate sub-
advisers without subsequent
shareholder approval
(Small Company Fund only).
5. Approval of the Trust's Bylaws as / / / / / /
proposed to be amended.
6. Approval of the proposed changes / / / / / /
to the fund's investment restrictions
(To vote against one or more of the
proposed changes but approve the
others, indicate the number(s) as set
forth in the proxy statement of the
investment restriction you do not
want changed on the line below.)
(All Funds voting separately except
Small Company Fund.)
</TABLE>
--------------------------------------
7. Upon such other business as may come
before the meeting.
The Trustees recommend voting "FOR" items 1 through 6.
